WME Ch.2 Ethics and Wealth Management

ch-2-ethics-and-wealth-management

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Question 1 of 1

Time Left

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What are the two main types of regulation for financial advisors?

Select the correct answer(s).

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What is often a starting point for client trust?

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Which statement about values is correct?

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You are an advisor and your firm is having a sales contest this month. The month's top producing advisor will win two free business class airline tickets to any destination in Canada. Identify the type of conflict the sales contest will most likely create.

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Explanation

With a short term vs. long term value conflict, immediate needs or desires run counter to future goals or prospects. The sales contest may cause you to recommend products or trades that, while great for your status in the contest, may cause long-term damage to your client relationships and, eventually, your long-term-well-being as an advisor

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Michael, an advisor, has a slow quarter and is wondering what he can do to generate some commission. Towards the end of the quarter, he decides to recommend some trades that do not quite suit the wealth plans of a few of his less sophisticated clients. He figures the clients will simply agree too the trades, as they usually do. Identify the ethical decision-making conflict Michael has put himself in.

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Explanation

Recommending trades that do not suit a client's investment policy is wrong. Michael could get into some serious trouble if his motivations and the truth behind them are discovered. Therefore, the value conflict faced by Michael is right vs. wrong conflict

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Feel Good Investments Inc. is a mid-range investment firm with 140 advisors and 5 senior managers. It has come up with a Code of Ethics after a lengthy research and input process. Select the decision regarding the establishment of a corporate Code of Ethics that is least effective.

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Explanation

While a code of ethics should be reviewed more frequently than every 10 years and testing employees may not work at a practical level, giving middle and senior management the chance to opt out of training sessions is the least effective alternative.

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You are an advisor and this weekend the wholesaler from Maple Leaf Funds is taking you out for a round of golf. On Friday, you get a call from a client who received an inheritance - he would like to invest the funds in the Patriot Canadian Equity Fund. You notice that the fund has a very low MER, but has had mediocre performance of late despite being a top quartile fund for many years. You try to persuade your client to invest in the Maple Leaf Equity Fund, which would pay you a higher trailer than the Patriot Fund, and has MER that is almost double of the Patriot Fund, whose recent fund performance is comparable to that of the Patriot Fund. Identify why this recommendation may hamper the trust this client has in you.

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Explanation

A conflict of interest arises when the personal or financial interests of the advisor conflict with the client's. In this situation, you are favouring the fund whose wholesaler provides free golf for your pleasure. And you are ignoring the fact that the Patriot Fund may be a better option for the client than the Maple Leaf Fund.

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XYZ Investment Management charges $99 annual administration fee on all accounts under $25,000. If Ryan, an advisor with XYZ, overrides this fee for his grandmother's $12,000 account, identify the type of value conflict Ryan faces.

Select the correct answer(s).

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Explanation

Truth vs Loyalty is a value conflict that occurs when values of honesty clash with values of commitment or personal responsibility. In this situation, Ryan must either charge his grandmother a fee that is consistent with his firm's regular practice, or adhere to his sense of loyalty to his family, which may prompt him to waive the fee.

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Asin is an Advisor with ABC Investing Inc. She lives lavishly and has difficulty meeting her financial obligations. She has an elderly client, Constance, with an investment portfolio of $300,000 and has a cash balance of $50,000. For several months now, Asin has been tempted to withdraw funds from Constance's cash account to pay her credit card bills; she will repay the money within 4 weeks. Which ethical test is Asin most likely falling in this situation?

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Explanation

While Asin may claim that she is not doing anything really wrong (because she puts money back into Constance's account within 4 weeks of withdrawing it), she is unlikely to pass the mom test - would she be comfortable revealing to her own mother what she's doing? The answer is NO

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George, an Advisor, has a client Penny, who has been with him for 8 years. Penny is a single parent, age 34, who works as a billing manager in an order fulfillment warehouse. George has made many investment recommendations to Penny and she has routinely given him the go ahead to implement them without second thought. Recently, Penny suffered a $10,000 loss on one investment recommended by George, which caused her lots of concern. Which element of the client-advisor relationship has been most likely violated in this situation?

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Explanation

In this case, since George has provided investment advise to Penny and she relied on that advice. A fiduciary relationship may exist where there is a special relationship of confidence and trust.

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All of the following are things that must be present for a trust-based relationship to develop between the advisor and client, except:

Select the correct answer(s).

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Rebecca has trading authority on her mother's investment account. What is another term that can be used to describe this arrangement?

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Values have common characteristics. Which of the following is one of those characteristics?

Select the correct answer(s).

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Which of these relationships are examples of fiduciary relationship? i. Doctor and Patient ii. Advisor and Client iii. Financial planner and client iv. A director and corporation

Select the correct answer(s).

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Hank is an investment advisor with a large brokerage firm. He just bought 1,000 ABC shares for his client Steve from another investor named Alex. Hank entered into this trade on behalv of Steve without Steve and Alex ever talking to each other. What allows wealth advisors and their firms the ability to enter trades on behalf of their clients?

WME Ch.2 Ethics and Wealth Management

Question 1 of 1

Time Left

What are the two main types of regulation for financial advisors?

Select the correct answer(s).

(0/0)

What is often a starting point for client trust?

Select the correct answer(s).

(0/0)

Which statement about values is correct?

Select the correct answer(s).

(0/0)

You are an advisor and your firm is having a sales contest this month. The month's top producing advisor will win two free business class airline tickets to any destination in Canada. Identify the type of conflict the sales contest will most likely create.

Select the correct answer(s).

(0/0)

Explanation

Select the correct answer(s).

(0/0)

Explanation

Feel Good Investments Inc. is a mid-range investment firm with 140 advisors and 5 senior managers. It has come up with a Code of Ethics after a lengthy research and input process. Select the decision regarding the establishment of a corporate Code of Ethics that is least effective.

Select the correct answer(s).

(0/0)

Explanation

Select the correct answer(s).

(0/0)

Explanation

XYZ Investment Management charges $99 annual administration fee on all accounts under $25,000. If Ryan, an advisor with XYZ, overrides this fee for his grandmother's $12,000 account, identify the type of value conflict Ryan faces.

Select the correct answer(s).

(0/0)

Explanation

Select the correct answer(s).

(0/0)

Explanation

Select the correct answer(s).

(0/0)

Explanation

All of the following are things that must be present for a trust-based relationship to develop between the advisor and client, except:

Select the correct answer(s).

(0/0)

Rebecca has trading authority on her mother's investment account. What is another term that can be used to describe this arrangement?

Select the correct answer(s).

(0/0)

Values have common characteristics. Which of the following is one of those characteristics?

Select the correct answer(s).

(0/0)

Which of these relationships are examples of fiduciary relationship? i. Doctor and Patient ii. Advisor and Client iii. Financial planner and client iv. A director and corporation

Select the correct answer(s).

(0/0)

Select the correct answer(s).

(0/0)

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